16 Feb 2012
Financial services advertising under the microscope, says ASIC
by Matthew Daley
ASIC will be paying more attention to advertising in the financial services sector, and has produced a new guide to help improve it
ASIC has promised greater scrutiny of the financial services sector's advertising, including online and mobile advertising, with the release of its new regulatory guide, RG 234 Advertising financial products and advice services: Good practice guidance, on Tuesday.
The Regulatory Guide is the result of a consultation process which was kick started with the release of the ASIC Consultation Paper 167 Advertising financial products and advice services: Good practice guidance, and comes at a time when ASIC is gearing up its activity in this area and has new powers:
In the last 18 months or so, 117 advertisements across the financial services sector have been withdrawn or remedied in response to concerns about poor practices and potentially misleading or deceptive conduct.
ASIC can now issue infringement notices and public warning notices, and civil pecuniary penalties are now up to $1.1 million per breach.
While it can bring out the big guns if needed, ASIC says it plans to work with the industry, starting with a forum in the first half of this year.
Who should read this?
If you're a promoter of financial products and financial advice services, you should understand these issues – that includes product issuers, financial advisers, distributors or agents.
Publishers of promotions about financial products and financial advice services should also be across these issues.
What does the new Regulatory Guide on advertising cover?
While much of it will be no great surprise to anyone familiar with the general law on misleading and deceptive conduct, the guide is a very useful primer both on the general law and the specific issues that arise in marketing investment and risk products and financial advice services (general and personal). Additional guidance will be released for advertising credit products and services.
There's a very practical focus in the guide, shown in particular by two things:
- its (very welcome) discussion of the specific challenges in online and mobile advertising, and its frank acknowledgment that these channels simply might not be suitable for promoting some products and services, given the difficulty of getting all relevant information across; and
- its use of advertisements that fell foul of the regulator as examples.
What will ASIC be looking at – and how?
As a start, all advertisements should be consistent with information provided in any related disclosure document, such as a PDS or prospectus.
ASIC's basic approach will be to look at the advertisement's overall impression, which can be assessed by looking at the advertisement's:
- the media used to communicate the information; and
- likely effect.
ASIC says that it will be looking in particular at
online and mobile advertising;
the way that risk is explained in advertising, particularly with words such as "guaranteed", "secure", "free", etc; and
financial services advertising in rural and regional areas, across all channels.
What are the key things to remember when creating advertising for financial services and products?
ASIC's guide very usefully sets out the main principles to remember in this area:
There is no requirement that the promoter intended to mislead consumers—the relevant question is whether the advertisement is in fact misleading or likely to mislead.
It is not necessary to show that consumers have actually been misled—the law prohibits conduct that is likely to mislead.
The relevant test is the reaction of an ordinary and reasonable member of the advertisement’s audience—normally anyone who is neither unusually astute nor unusually gullible.
The audience is not the audience that the promoter would like, but the audience the advertisement actually reaches.
Consumers cannot be expected to study or revisit an advertisement—the most important consideration is the overall impression created by the advertisement when viewed for the first time.
Qualifications of a headline claim must be clear and prominent—some headline claims are so strong that any separate qualification will not correct any misleading impression.
If an advertisement is misleading, then it cannot be cured—a promoter cannot rely on an accurate disclosure document to undo the effect of a misleading advertisement.
Silence can be misleading or deceptive when it is reasonable for a consumer to expect disclosure of important information—silence on important details can render a statement misleading, even though it is factually correct.